What is Gross Profit?

Over the next few weeks we will be discussing gross profit margin. We’ll take a look at what gross profit is, what it means to your company, and how to calculate labor burden and make proper adjustments to labor on a project. Also, we’ll have some money saving tips to help increase your gross profit.

Day 1 – What is Gross Profit?:

According to Investing Answers – https://investinganswers.com/dictionary/g/gross-profit-margin . Profit margin is calculated by subtracting cost of goods sold (COGS) from total revenue. Then divide that number by total revenue. The top number in the equation, known as gross profit or gross margin, is the total revenue minus the direct costs of producing that good or service.

To a contractor, this means the money remaining from a project after all of the direct costs associated with the completion of that project have been subtracted from the total sale of the project.

Total Project Bid = \$25,000

Direct Job Cost = material \$9,500 + labor \$6,000 + permit \$200 + equipment \$500 +fuel \$100 + special tools \$50.00 = \$16,350

Bid \$25,000 – Cost \$16,350 = \$8,650 Gross Profit

Gross Profit \$8,650 / \$25,000 = 34.6% Gross Profit Margin